Beware of Buying Clubs

By Molly SinclairJanuary 5, 1985

Even the best laid plans for saving money can backfire.

Consider the case of J.B. Withers, a Silver Spring resident who paid $60 last year to join Consumer Central, a Rockville-based buying service that promised him major savings on a wide range of merchandise. Withers, as a member of the service, was supposed to save by buying direct from a "vast network of wholesale suppliers," thereby avoiding store markups for advertising, overhead and profits.

To test the concept, Withers ordered two tires for $113.74. They arrived about a month later, in keeping with the two-to-four week delivery plan. Reassured by that experience, Withers ordered $919 worth of stereo equipment.

But he never got the merchandise, and, despite repeated requests, he has yet to receive a refund.

Now, six months later, he doesn't think he has much chance of ever getting his money back from the financially troubled Consumer Central. John R. Garza, an attorney for Consumer Central, said yesterday that the firm is about to declare bankruptcy and that a formal bankruptcy petition may be filed in U.S. Bankruptcy Court as early as next week.

Problems for the company, which was launched in 1978, began last year when Marvin Yoder, its principal founder, suffered a heart attack, according to attorney John Dugan, who has represented the company in the past. "Without Yoder, Consumer Central ran into financial difficulties," Dugan said.

He said that Consumer Central depended on membership fees to operate and that membership fell during Yoder's six-month absence. Even after Yoder returned to work part time in mid-1984, he was unable to turn Consumer Central around, Dugan said.

Meanwhile, consumers who were unable to get merchandise or refunds from Consumer Central began complaining to the Montgomery County Office of Consumer Affairs. Investigator Susan Cohen said that 16 of the early cases were resolved satisfactorily.

But 23 more recent cases, involving nearly $16,000 in purchases, including Withers' stereo equipment, are unresolved, she said.

This week the consumer agency filed a lawsuit against Consumer Central, which is also known as Associated Distributors, accusing the company of deceptive trade practices and asking the court to order refunds to consumers. News of the lawsuit triggered another 50 telephone calls from consumers seeking to file complaints against the company, Cohen said.

"The complaints are from consumers from all over the Washington area -- Virginia, Maryland and the District of Columbia -- and there is even one from Mississippi," Cohen said.

She said that consumers who join any buying club take a risk because of the unstable nature of the industry. "One 1980 report by the Federal Trade Commission said that one of the major drawbacks to buying clubs is their instability," Cohen said. "The report said that 80 percent of 239 buying clubs surveyed went out of business during the investigation. And only two of the clubs were more than eight years old."

Cohen said that consumers considering membership in a buying club should remember:

* You take a risk anytime you pay in advance for merchandise to be delivered at a later date. To reduce the risk, pay a minimum deposit and deal with companies that are bonded or that put the money into escrow accounts.

* Any membership fee you pay adds to the cost of the merchandise you buy.

* Shop around for the item you want. It may be available from a local store at a sale price that is less than that offered by the buying service.